Mis-sold payment protection insurance is chief villain as complaints to Financial Ombudsman soar

'There is an atmosphere of universal suspicion and distrust'

Personal Finance Editor

The Financial Ombudsman was deluged by 179 per cent more complaints in the last three months compared to the same period last year. It received 159,197 new complaints, although most of them - 132,152 - were about mis-sold payment protection insurance.

The figures prompted the chief ombudsman Natalie Ceeney to say that trust in financial services is at a low point. "There is an atmosphere of universal suspicion and distrust [that] will undoubtedly affect our ability to handle complaints smoothly and quickly," she said. "It is really unhelpful to have another damaging episode like this."

But the new figures also reveal an emerging mis-selling story around packaged bank accounts.

The number of complaints received in three months was almost half the total received in the whole of last year.

Meanwhile two-thirds of complaints about packaged accounts were upheld, a much higher rate than many other financial products.

Less than a third of complaints about current accounts, mortgages or credit cards were upheld, for instance.

"The majority of packaged account complaints we see are about the sale of the policy," the ombudsman reported.

"However we do receive a significant number of complaints about the products 'packaged' with the accounts, from mobile phone insurance to travel insurance."

Problems with the cover included with the accounts tend to come to light when people make a claim - only to find that their policy offered only limited cover or pays out only under the most particular of circumstances.

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